BRUSSELS (Reuters) - Belgian drug developer Ablynx NV (ABLX.BR) looks well positioned for a partnering deal on its most advanced drug after revealing data last week that showed the treatment may have benefits over its biggest rival.
If successful, the drug would compete against multi-billion dollar blockbusters in the growing $14 billion a year market for treating rheumatoid arthritis, driven by increasing life expectancy in the world's richest countries.
A partnering deal for the drug, known as a ATN-103, could have a major impact on the company's share price.
"I think it has got more chance than the market is suggesting," said Edison Investment Research analyst Mick Cooper. "I think they'll be able to a deal of some sort ... If they can find a partner then there's huge, huge upside."
Ablynx, which makes ultra-small antibodies derived from llamas, saw its shares fall as much as 21 percent after Pfizer Inc (PFE.N) returned the rights to the drug in November last year. In the last 12 months the stock has lost almost 70 percent of its value.
When Ablynx expanded its relationship with Germany's Merck KGaA (MRCG.DE) into osteoarthritis in November last year, it received an upfront payment of 20 million euros ($25 million).
A deal for ATN-103, an inflammation-fighting drug targeting tumor necrosis factor alpha, or TNF-alpha, could be greater than this as it has completed Phase II mid-stage trials in people, making it Ablynx's most advanced project.
By way of comparison, Belgian rival Galapagos NV GLPG.BR received an upfront payment of $150 million in February from U.S.-based Abbott Laboratories (ABT.N) as part of a $1.35 billion deal for GLPG0634, a newer class of inflammation fighter known as a janus kinase or JAK inhibitor.
Ablynx makes most of its money from milestone payments and analysts are expecting it to receive a payment in 2013 for a deal on ATN-103. The company has said it will make an announcement by the end of this year.
Overall, analysts foresee revenue in 2013 between 26 million euros and 75 million, with an average of 40 million, according to StarMine.
However, Ablynx also has a number of molecules likely to enter human trials as well during this period, which are also included in this number.
"I think any deal would be probably be back-end weighted," said Cooper. "There would probably be a fair amount associated with sales milestones."
The market for TNF-alpha targeting drugs is highly competitive and any treatment would have to take on blockbusters such as Abbott Labs' Humira, one of the world's biggest-selling drugs.
So for the Ablynx drug to compete, it would need a partner with a significant warchest, or target a niche area. The drug also still needs to complete large-scale trials, a significant expense for any partner.
However, last week's data showed few patients developed immunity to the Ablynx drug, a problem that can affect Humira.
"I think (the data) is going to allow us to speak to a lot more people, to go back to people who said at first stage that the product was not sufficiently differentiated," said Ablynx Chief Executive Edwin Moses.
Edison's Cooper said the data meant Ablynx could approach a major drug group, but added the chances of it getting a deal with one of the top groups were no better than evens.
"This data could tip the balance in their favor to get some of the Big Pharmas to look at it a bit closer and potentially in-license the product," he said. "To do a large deal it's 50-50."
If Ablynx ended up getting a deal with a specialized company, it may be with firm like India's Ranbaxy (RANB.NS).
KBC Securities analyst Jan De Kerpel does not expect the drug to become another blockbuster like Humira, but says Ablynx could sign a deal with a smaller company.
"Maybe a partner can go into a certain geographical zone with a drug like this, for instance in Asia or in certain countries, or they can go into certain specific niche areas, but I do not believe that the drug will be another Humira," he said.
"If they are able to close a deal on it and get some upfront money from it, that would be very positive." ($1 = 0.7880 euros)
Editing by David Holmes